A question:

[elleng]

I'm a retired Federal employee with a decent pension, small Social Security, and survivor Federal pension and Social Security income. I also have investments, managed, almost $80,000. I have 2 young grandsons, one 1 year old, and one 5 months old, and there may be more grandkids in the future.

Daughters will receive my investment assets, 50/50, 'transfer on death,' but am thinking of what I might do for grandsons' educations. Daughters received large sums after their father, my husband, died, and one has a good job in occupational therapy, as well as a large house, other daughter has decided to stay at home with the baby. Their cash flows, investments and savings vary.

I'm thinking about what I might and should do for grandsons' educations. Set up some sort of special funds for them? Educ savings? Bonds? or keep everything in my investment account and let their parents deal with their educations.

Thoughts?

Thanks

[NYC_SKP]

1. This is quite a challenge, but I have some ideas.

I don't know your kids but I've created scholarships before with sponsor funds.

First, what qualifies as "education" in my mind is more broad than what most others might feel; different experiences outside of formal post-secondary educational programs can be very educational.

I would consider supporting experiences abroad, service learning projects, Peace Corp tours, Habitat for Humanity, etc.

I might also entertain funding a business plan if the grandchild wrote a convincing proposal, and make part-time enrollment in courses a condition of this.

Not all learners are ready for college at the same time, and some are more well suited to other pursuits.

I would try to find a way to include different possibilities.

[elleng]

2. Absolutely, SKP,

and particularly relevant as one of my daughters had/has learning differences so was/is in need of particular focus. She is also a great teacher!

And travel + education abroad part of my education, and that of one of my daughters.

As the babies, won't be writing proposals for a while, would like ideas on how to maximize their options way down the road. I'd entertain anything, but maybe should create an age trigger: At or around the age of 16, blah blah blah.

[SheilaT]

3. You might want to talk to an estate attorney about this.

Perhaps you can set up some kind of a trust, money left to your grandchildren and worded so that additional grandchildren not yet born are automatically included. Then, have language that does very broadly construe education. To have funds available for summer programs could be quite wonderful.

My children had the good fortune to have well-off and generous grandparents, and as a consequence I was able to send them on some wonderful summer programs, and it was greatly appreciated. Good for you for wanting to do this.

Oh, and it is my opinion that even if your daughters' financial situations are very different from each other, do set this up so that all grandchildren benefit equally. Just my opinion here.

[elleng]

4. Yes, surely will set up for equal benefits,

as my Dad did; not knowing how many grands there would be, he wrote $10,000/per. Luckily there were adequate funds for the 4, from which my daughters have benefited (rather recently.)

'Transfers on Death' accounts are easily done, and beneficiaries easily named. Could probably figure it out, but would like to know if there are particular investment vehicles that might be better for them than my current managed funds are.

[SheilaT]

5. There may well be better funds.

I'm not an expert on such things, but I have a financial adviser who helps me. Depending on what the situation is with your managed funds, talk to whoever is running them. Otherwise, I'd suggest a good index fund. Keep it simple.

[elleng]

6. Right. Right.

Thanks, SheilaT.

[lastlib]

7. You should also check out your state's 529 plans

See what they offer, if anything. You might also consider setting up a fund for them under a Uniform Gift to Minors Act. Consult an attorney on that.

[elleng]

8. 529 plans mean within a certain state?

Only 1 is in MY state, and might move in years. How flexible are they, and what do they promise and deliver?

Gifts to minors possible, but again, how flexible? More than one? Named or not yet named?

Thanks for suggestions, lib.

[lastlib]

9. Here is a quick summary of 529 plans for you

https://www.edwardjones.com/en_US/products/education_saving/529_plans/index.html?utm_source=msn&utm_medium=cpc&utm_term=%2Bwhat+%2Bis+%2B529+%2Bplan&utm_campaign=Products_BMM

There are a lot of nuances to them, and a bit of variety by state.

Here is a link to read up about gift to minors rules:

http://evans-legal.com/dan/giftsminors.html

Again, rules vary from state to state, your mileage may differ..... Hope this helps!
Happy New Year!

[elleng]

12. Thanks again, lib.

I clearly have homework to do!

HAPPY NEW YEAR!

[SheilaT]

10. A 529 may be set up in any state to benefit

anyone in another state, who can attend college anywhere at all. It's just that some of the plans offer better tax advantages to the person funding them, or some such. I don't know a lot about them, but the same grandparents set up 529's for my sons and on this side we didn't have to be concerned about where they were set up, because the money could be used for schools anywhere. The flexibility is great.

The typical language in them covers "reasonable" expenses connected to education, including the cost of room and board. That last provision means that my son, still in school, can see what room and board would cost at the college he is currently attending, and use that amount to help pay for his rent and groceries.

But, and here's the big caveat, money in a 529 only comes out tax free if it's used for tuition, books, room, board, and other reasonable expenses. So a 529 can't be tapped to cover a summer language camp in Montreal, for instance. So just be very aware of the limitations of a 529, and if what you'd rather have for your grandchildren is money available for enrichment kinds of things, then a 529 is not what you'd want.

You are a wonderful grandmother.

[elleng]

11. Thanks, SheilaT.

You're a wonderful mother! I'm just beginning the learning process of being a 'grand!'

Must say inspired by my wonderful father, who thought of his grands-to-be well ahead of their existence. He was the explorer and inspired all of us to travel. so I may opt for maximum flexibility.

HAPPY NEW YEAR!